data monitor - retail lending in the us - dec 2008

7/29/2019 Data Monitor - Retail Lending in the US - Dec 2008

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Retail Lending in theUnited States

Industry Profile

Reference Code: 0072-2336Publication date: December 2008


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United States - Retail Lending

Datamonitor (Published December 2008) Page 2

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EXECUTIVE SUMMARY



EXECUTIVE SUMMARY

Market Value

The United States retail lending market shrank by 4.4% in 2008 to reach a value of

$12.516.7 billion.

Market Value Forecast

In 2013, the market is forecast to have a value of $14,929 billion, an increase of

19.3% since 2008.

Market Segmentation I

Mortgage lending is the largest category in the US market with 80.4% of revenues

generated this way.

Market Segmentation II

The US generates 45.5% of revenues in the global market.


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CONTENTS



TABLE OF CONTENTS

EXECUTIVE SUMMARY 3

CHAPTER 1 Market Overview 7

1.1 Market Definition 7

1.2 Research Highlights 7

1.3 Market Analysis 8

CHAPTER 2

Market Value 9

CHAPTER 3 Market Segmentation I 10

CHAPTER 4 Market Segmentation II 11

CHAPTER 5 Competitive Landscape 12

CHAPTER 6 Leading Companies 15

6.1 Citigroup Inc. 15

6.2 Bank of America Corporation 18

6.3 JP Morgan Chase & Co 22

CHAPTER 7 Market Forecasts 26

7.1 Market Value Forecast 26

CHAPTER 8 Macroeconomic Indicators 27


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CONTENTS



CHAPTER 9 Appendix 28

9.1 Methodology 28

9.2

Industry Associations 29

9.3 Related Datamonitor Research 29


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CONTENTS



LIST OF TABLES

Table 1: United States Retail Lending Market Value: $ billion, 2004-2008........................9

Table 2:

United States Retail Lending Market Segmentation I: % Share, by Value,

2008(e) .............................................................................................................10

Table 3: United States Retail Lending Market Segmentation II: % Share, by Value,

2008(e) .............................................................................................................11

Table 4: Key Facts: Citigroup Inc....................................................................................15

Table 5: Key Financials: Citigroup Inc. ...........................................................................17

Table 6: Key Facts: Bank of America Corporation ..........................................................18

Table 7:

Key Financials: Bank of America Corporation...................................................21

Table 8: Key Facts: JP Morgan Chase & Co ..................................................................22

Table 9: Key Financials: JP Morgan Chase & Co...........................................................25

Table 10: United States Retail Lending Market Value Forecast: $ billion, 2008-2013.......26

Table 11: United States Size of Population (million) , 2004- 2008(e)................................27

Table 12: United States GDP (Constant 2000 Prices, $ billion), 2004- 2008(e)................27

Table 13:

United States Inflation, 2004- 2008(e) ..............................................................27


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MARKET OVERVIEW



CHAPTER 1 MARKET OVERVIEW

1.1 Market Definition

This retail lending market profile covers the mortgage and consumer credit market.

The market value reflects mortgage and consumer credit balances outstanding at the

end of the year. At the time of preparation of this report, many financial markets were

in a critical state due to the credit crunch, and it was difficult to predict how this

would impact on retail lending. For this reason, all forecasts in this profile should be

regarded as highly approximate. All currency conversions used in this profile were

carried out at constant 2007 annual average exchange rates.

For the purpose of this report the Americas comprises Brazil, Canada, Mexico and

the US.

1.2 Research Highlights

The US retail lending market generated total revenues of $12,516.7 billion in 2008,

representing a compound annual growth rate (CAGR) of 5.6% for the period spanning

2004-2008.

The mortgage lending segment was the markets most lucrative in 2008, generating

total revenues of $10,057.3 billion, equivalent to 80.4% of the market's overall value.

The performance of the market is forecast to decelerate, with an anticipated CAGR of

3.6% for the five-year period 2008-2013, which is expected to drive the market to a

value of $14,928.9 billion by the end of 2013.


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MARKET OVERVIEW



1.3 Market Analysis

After a period of steady growth, the US retail lending market declined in 2008. Further

declines are expected, however the market is forecast to recover and post steadily

increasing growth rates towards 2013.

The US retail lending market generated total revenues of $12,516.7 billion in 2008,

representing a compound annual growth rate (CAGR) of 5.6% for the period spanning

2004-2008. In comparison, the European and Asia-Pacific markets grew with CAGRs

of 6.3% and 5.3%, respectively, over the same period, to reach respective values of

$9,557.3 billion and $4,078.9 billion in 2008.

The mortgage lending segment was the markets most lucrative in 2008, generating

total revenues of $10,057.3 billion, equivalent to 80.4% of the market's overall value.

The consumer credit segment contributed revenues of $2,459.4 billion in 2008,

equating to 19.6% of the market's aggregate revenues.

The performance of the market is forecast to decelerate, with an anticipated CAGR of

3.6% for the five-year period 2008-2013, which is expected to drive the market to a

value of $14,928.9 billion by the end of 2013. Comparatively, the European and Asia-

Pacific markets will grow with CAGRs of 3.6% and 2.8%, respectively, over the same

period, to reach respective values of $11,411.7 billion and $4,684.4 billion in 2013.


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MARKET VALUE



CHAPTER 2 MARKET VALUE

The United States retail lending market shrank by 4.4% in 2008 to reach a value of

$12.516.7 billion.

The compound annual growth rate of the market in the period 2004-2008 was 5.6%.

Table 1: United States Retail Lending Market Value: $ billion, 2004-2008

Year $ billion % Growth2004 10,064.82005 11,189.6 11.20%2006 12,291.2 9.80%2007 13,097.0 6.60%2008 12,516.7 -4.40%CAGR, 2004-2008: 5.6%

Source: Datamonitor D A T A M O N I T O R

Figure 1: United States Retail Lending Market Value: $ billion, 2004-2008


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2004 2005 2006 2007 2008

$

billion

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%8.0%

10.0%

12.0%

%Growth

$ billion % Growth


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MARKET SEGMENTATION I



CHAPTER 3 MARKET SEGMENTATION I

Mortgage lending is the largest category in the US market, generating 80.4% of the

overall revenues.

Consumer credits generate a further 19.6% of revenues.

Table 2: United States Retail Lending Market Segmentation I: % Share,

by Value, 2008(e)

Category % ShareMortgage Lending 80.40%Consumer Credit 19.60%

Total 100.0%


Figure 2: United States Retail Lending Market Segmentation I: % Share,

by Value, 2008(e)


Mortgage

Lending

80.4%

Consumer Credit

19.6%


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MARKET SEGMENTATION II



CHAPTER 4 MARKET SEGMENTATION II

The US generates 45.5% of revenues in the global market.

Europe accounts for a further 34.8% of the global market value.

Table 3: United States Retail Lending Market Segmentation II: % Share,

by Value, 2008(e)

Geography % ShareUnited States 45.50%Europe 34.80%Asia-Pacific 14.80%Rest of the World 4.90%Total 100.0%


Figure 3: United States Retail Lending Market Segmentation II: % Share,

by Value, 2008(e)


United States

45.5%

Europe

34.8%

Asia-Pacif ic

14.8%

Rest of the

World

4.9%


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COMPETITIVE LANDSCAPE



CHAPTER 5 COMPETITIVE LANDSCAPE

For the purposes of this profile, the US retail lending market consists of consumer

credit and mortgages, valued in terms of outstanding balances rather than interest

and non-interest revenues obtained by credit providers. Individuals taking any form of

credit or mortgage are considered as buyers. Banks, building societies, credit card

companies and any others financials institutions that are involved in the credit and

mortgage market are taken as players and information technology and

communications systems companies as suppliers. The buyer power in this market is

moderate as players are trying to regain their confidence in financial products. The

effects of the economic downturn have not directly influenced the suppliers, whose

services are essential for running the financial business. The threat of new entrants is

bigger in the US where several major players ceased to exist, rather than in other

countries where the well established institutions may post quite a substantial

retaliation during recession. Alternative options to lending are growing as confidence

in financial institutions weakens and individuals face uncertain times.

Considering the fact that in retail lending the buyers are individual consumers, buyer

power in this market is weakened. Losing one customer has a fairly marginal impact

on a typical credit provider, although at the time of writing this report the lending

institutions tend to devote their funds and time in order to keep the customer or tempt

them offering better terms of the agreement once switched from other lenders.

Switching costs may also significantly weaken buyer power. For example, switching

mortgage provider may require the buyer to spend time on paperwork and impose

additional fees, even though a new provider might offer a cheaper loan in the longer

term. Changing credit card provider can appear to have low switching costs - in fact,

the buyer may be offered 0% interest for a period or other inducements to switch - but

there is growing awareness that moving from one credit card provider to another too

frequently can reduce customer's credit rating, which constitutes significant switching

costs. Means of differentiation in this market include a variety of loyalty schemes for

credit cards, and the development of products such as the 'current account

mortgage': a current (checking) account that includes a mortgage and the facility to

secure other loans against the mortgaged real estate. Consumer loyalty is the major

issue for lenders as the current, unpredictable situation in the lending market pushes

customers to switch around in the hope of finding the best and the most secured

funds provider. Overall, buyer power is assessed as moderate.

In the US retail lending market, suppliers of information technology and

communications systems have considerable power. It is important for lenders such as

banks, building societies, and credit card companies to have ITC systems that can

deal with large numbers of transactions rapidly and reliably. As identity theft becomes

an increasing threat, lenders must offer continual upgrades to their security systems.


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Typical suppliers are large companies such as IBM, since relatively few suppliers

have sufficient resources and experience to analyse the complex ICT needs of a

major retail lender and implement a solution. Furthermore, although major financial

institutions will maintain their own IT departments, there is little likelihood of

significant backward integration, which further strengthens suppliers (although it is

equally unlikely that suppliers would attempt to integrate forwards into financial

services). Switching costs are high, since there are significant sunk costs associated

with the commissioning of a particular ITC system (custom hardware, staff training,

etc). Additional costs for major retail lenders such as banks and building societies

include salaries, rents, and other overheads associated with their extensive high

street branch networks. While many companies offering lending facilities are financial

institutions that hold the assets themselves, others act purely as retailers. For

example, store cards and private label credit cards are offered to end-users by a

variety of companies and organisations. In these cases, the suppliers are the

companies extending credit upstream, and again, these will generally have moderate

supplier power relative to the retailers. Supplier power is assessed as moderateoverall in this market.

The US lending market is estimated to post quite healthy growth rates after 2010

which may encourage new entrants to emerge at this time. However, in the current

economic climate lending has dropped and the housing market is facing decline,

which offers an uncertain prospect for potential new entrants. The fact that

customers confidence in established institutions has been recently impaired might

push them towards new institutions with innovative (or just the opposite traditional)

attitudes towards lending. However, entry to the market in the form of a fully-fledged

bank or similar financial institution requires substantial amounts of capital, to establish

a branch network and brand identity, and also to comply with the international strictcapital adequacy requirements. However, it is possible to enter the market as an

intermediary, offering consumers credit that is ultimately sourced by a third-party

institution. This is an easier mode of entry. Overall, the likelihood of new entrants is

assessed as moderate.

The recent highly publicized crisis of various financial institutions along with the

current economic climate and predictions of further downturn are strongly

undermining the confidence in market players. The threat of recession and possible

losses to loans banks is likely to inevitably result in the restriction of capital and lower

willingness of consumers to borrow and, consequently, negatively affect the financial

condition of banks and investors. Such a situation in the lending market may pushconsumers to look for alternatives. However, when considering, for example, the

average price of property few realistic substitutes exist for mortgages. Rental seems

to be the most suitable possibility, but over a typical lifetime may not be cheaper than

purchase. Debit cards are a partial substitute for credit cards, offering the same

advantages over cash (convenience, security, ability to carry out remote transaction

such as online purchases), but of course do not offer credit facilities.


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Another substitute for retail lending is to delay purchases and use retail saving

products, such as bonds, to build up sufficient funds, which is becoming even more

popular at the time of the report writing. Generally, however, consumer credit has

proved itself a very popular substitute for the more traditional approach. Overall the

threat of the substitutes in the US retail lending market is moderate.

The main primary sources of retail lending in the US (banks and similar financial

institutions) are all fairly similar in service portfolios and business models, although

players try to differentiate themselves by offering a wide range of lending services

and competitive interest rates. The latest situation in the US lending market caused

major players like Lehman, to withdraw from the stage, reducing significantly the

number of the very strong players. However the biggest credit market in the world is

on constant outlook for lending services and the prediction for the future is optimistic

which may ease the present fierce rivalry in forthcoming years. The general downturn

in the housing market may intensify competition going forward. However, the present

lower demand for these services, caused by the general distrust mitigates the former.

The, present decreasing global lending market, may cause the rivalry level to grow.

All in all the rivalry level is assessed as strong.


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LEADING COMPANIES



CHAPTER 6 LEADING COMPANIES

6.1 Citigroup Inc.

Table 4: Key Facts: Citigroup Inc.

Address: Citigroup Inc., 399 Park Avenue, New York, New York10043, USA

Telephone: 1 212 559 1000Website: www.citigroup.comFinancial Year-End: December

Source: Company Website D A T A M O N I T O R

Citigroup (or 'the group') is one of the most diversified financial services company in

the world. The group's product portfolio includes retail banking, corporate banking,

investment banking and asset management. The group has operations in 100

countries spanning North America, Latin America, Asia, Europe, the Middle East and

Africa. Citigroup is headquartered in New York City, New York and employs about

374,000 people.

Citigroup is a diversified global financial services holding company, It has more than

200 million customer accounts in over 100 countries. Citibank, a subsidiary, is

Citigroup's arm in commercial banking. Citibank's principal offerings include

consumer finance, mortgage lending, and retail banking products and services,investment banking, commercial banking, cash management, trade finance and e-

commerce products and services, and private banking products and services.

Citigroup operates in the following regions: North America, Latin America, Asia,

Europe, the Middle East and Africa

The company operates through five operating segments: global consumer group,

markets and banking, global wealth management, alternative investments and

corporate and other.

Global consumer group provides an array of banking, lending, insurance and

investment services. The segment's distribution network includes 8,527 branches,approximately 20,000 ATMs, and 530 automated lending machines (ALMs), the

Internet, telephone and direct mail, and through independent representatives. Global

consumer group is comprises the U.S. consumer and international consumer

businesses. The U.S. consumer is composed of four businesses: cards, retail

distribution, consumer lending and commercial business.


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LEADING COMPANIES



Operating in fie geographies including Mexico, Latin America, EMEA, Japan, and

Asia, international consumer sub segment is composed of three businesses: cards,

consumer finance and retail banking.

Markets and banking segment provides trading, investment banking, and commercial

lending products and services to corporations, governments, institutions and

investors in approximately 100 countries. Markets and banking has the following sub-

segments: securities and banking, transaction services and other.Securities and

banking offer an array of investment banking services and products including

advisory services, debt and equity trading, institutional brokerage, foreign exchange,

structured products, derivatives, and lending. Transaction services include cash

management, trade services, and securities and fund services (SFS).

The global wealth management (GWS) division comprises three of brands: The Citi

Private Bank, Smith Barney and Citi Investment Research. The CIti Private Bank

provides personalized wealth management services for high-net-worth clients in

around 33 countries and territories. These services include investment management,

investment finance and banking services. Smith Barney provides investment advice,

financial planning and brokerage services to affluent individuals, companies, and non-

profits organizations. Citi Investment Research covers more than 3,000 companies

that represent 90% of the market capitalization of the major global indices. It also

provides macro and quantitative analysis of global markets and sector trends.

Alternative investments (AI) manage capital on behalf of Citigroup, as well as for

third-party institutional and high-net-worth investors. AI is an integrated alternative

investment platform that manages a range of products across five asset classes:

private equity, hedge funds, real estate, structured products and managed futures.

Alternative investments (AI) manage capital on behalf of Citigroup, as well as for

third-party institutional and high-net-worth investors. AI is an integrated alternative

investment platform that manages a range of products across five asset classes:

private equity, hedge funds, real estate, structured products and managed futures


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LEADING COMPANIES



Key Metrics

Table 5: Key Financials: Citigroup Inc.

Metric 2003 2004 2005 2006 2007

Revenues 71,594.0 79,635.0 83,642.0 89,615.0 81,698.0Net Income 17,853.0 17,046.0 24,589.0 21,538.0 3,617.0

Profit Margin 24.9% 21.4% 29.4% 24.0% 4.4%

Total Assets 1 ,264 ,032. 0 1,484 ,101 .0 1,494 ,037 .0 1,884 ,318 .0 2 ,187, 631.0

Total Liabi lit ies 1,166,018.0 1,374,810.0 1,381,500.0 1,764,535.0 2,074,033.0

Employees 259,000 294,000 307,000 337,000 374,000All in $ millions, except for employee numbers and margins

Source: Company Filings D A T A M O N I T O R

Figure 1: Revenues & Profitability: Citigroup Inc.

0

20,000

40,000

60,000

80,000

100,000

2003 2004 2005 2006 2007Year

US$Millions

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

ProfitMargin(%)

Revenues Net Income Profit Margin



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LEADING COMPANIES



6.2 Bank of America Corporation

Table 6: Key Facts: Bank of America Corporation

Address: Bank of America Corporation, Bank of America CorporateCenter, 100 North Tryon Street, Charlotte, North Carolina28255, USA

Telephone: 1 704 386 5681Website: www.bankofamerica.comFinancial Year-End: DecemberTicker: BACStock Exchange: New York


Bank of America Corporation (BoA or 'the company') is one of the world's largestfinancial institutions. It serves individual consumers, small businesses and large

corporations with a range of banking, investing, asset management and other

financial products and services. The company primarily operates in the US, Latin

America, Europe and Canada. BoA is headquartered in Charlotte, North Carolina and

employs 210,000 people.

BoA is a US based bank holding company. Through its banking and non-banking

subsidiaries in the US and selected international markets, BoA provides a range of

financial services and products. The company operated in more than 30 states in the

US, the District of Columbia, and 44 foreign countries, in December 2006. In the US,

BoA serves more than 55 million consumer and small business relationships with

more than 5,700 retail banking offices, more than 17,000 automated teller machines

(ATMs) and through the Internet.

BoA generates revenue through four business segments: global consumer and small

business banking, global corporate and investment banking, global wealth and

investment management, and others.

Global consumer and small business banking (GCSBB) serves approximately 53

million consumer households in addition to small businesses across the US. BoA's

retail franchise covers 30 states in the US and the District of Columbia, representing

around 76% of US residents. Within GCSBB there are four businesses: deposits,

card services, mortgage and home equity. BoA's deposit products include traditional

savings accounts, money market savings accounts, certificate of deposit (CDs),

individual retirement account (IRAs), and regular and interest checking accounts.

Debit card results are also included in deposits. In the fiscal year ended December

31, 2006, the company added approximately 2.4 million net new retail checking

accounts and 1.2 million net new retail savings accounts.


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LEADING COMPANIES



The card services sub division offers consumer and business cards, unsecured

lending, merchant services and international card services. BoA offers a variety of co-

branded and affinity credit card products. The mortgage business includes the

origination, fulfillment, sale and servicing of first mortgage loan products. Servicing

activities include collecting cash for principal, interest and escrow payments from

borrowers, and accounting for and remitting principal and interest payments to

investors, and escrow payments to third parties. In addition to the company's own

distribution channels, mortgage products are sold through more than 6,500 mortgage

brokers in 50 states of the US.

As on December 31, 2006, the servicing portfolio of BoA was valued at $333 billion.

Home equity generates revenue by providing a line of home equity products and

services to customers nationwide. Home products are distributed through the

company's retail network and through partnership with mortgage brokers. As on

December 31, 2006, the home equity servicing portfolio was $86.5 billion.

Global corporate and investment banking (GCIB) provides a range of financial

services to clients ranging from companies with $2.5 million in revenues to large

multinational corporations, governments, institutional investors and hedge funds.

BoA's clients are supported through offices in 26 countries that are divided into four

distinct geographic regions: US and Canada; Asia; Europe, Middle East, and Africa;

and Latin America. GCIB products and services are delivered from three primary

businesses: business lending, capital markets and advisory services, and treasury

services.

Business lending provides lending related products like commercial and corporate

bank loans and commitment facilities to business banking clients, middle market

commercial clients and large multinational corporate clients.

Real estate lending products are issued to public and private developers,

homebuilders and commercial real estate firms. Products also include indirect

consumer loans offered through financing automotive, marine, motorcycle and

recreational vehicle dealerships across the US. The capital markets and advisory

services sub division provides products, advisory services and financing to

institutional investor clients globally. BoA also provides debt and equity underwriting

and distribution capabilities, merger related advisory services and risk management

solutions.

The treasury services sub division provides integrated working capital managementand treasury solutions to clients worldwide through a network of proprietary offices

and special clearing arrangements. Products and services include treasury

management, trade finance, foreign exchange, short-term credit facilities and short-

term investing options.


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LEADING COMPANIES



Global wealth and investment management provides customized banking and

investment services customized to the wealth management goals of individual and

institutional customers. The services are offered through three primary businesses:

the private bank, Columbia Management (Columbia), and premier banking and

investments (PB&I). In addition, the segment includes the impact of Banc of America

Specialist and the results of asset liability management activities.

The segment also includes the impact of transferring 'qualifying affluent customers'

from 'global consumer and small business banking' to 'PB&I customer service model'.

The private bank provides investment, trust and banking services, as well as specialty

asset management services for oil and gas, real estate, farm and ranch, timberland,

private businesses and tax advisory services.

The private bank also provides integrated wealth management solutions to high-net-

worth individuals and families with investable assets greater than $50 million through

its Family Wealth Advisors unit. Columbia is an asset management business serving

the needs of both institutional clients and individual customers.

Columbia provides asset management services including mutual funds, liquidity

strategies and separate accounts. Columbia mutual fund provides an array of

investment strategies and products including equities, fixed income, and money

market funds. Columbia distributes its products and services directly to institutional

clients. The company reaches individual clients through the private bank, Family

Wealth Advisors, premier banking and investments, and non-proprietary channels,

including other brokerage firms.

PB&I include Banc of America Investments, the company's full-service retail

brokerage business and its premier banking channel. PB&I has a network of

approximately 4,400 client advisors with a personal wealth profile that includes

investable assets plus a mortgage that exceeds $500,000 or at least $100,000 of

investable assets.

Others includes BoA's equity investment businesses, the residual impact of the

allowance for credit losses and from the cost allocation processes, merger and

restructuring charges, inter segment eliminations, and the results of certain consumer

finance and commercial lending businesses that are being liquidated. Others also

includes certain amounts associated with asset liability management activities,

hedges of interest rate and foreign exchange rate fluctuations, certain gains or losses

on sale of whole mortgage loans, and gains or losses on sale of debt securities.


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LEADING COMPANIES



Key Metrics

Table 7: Key Financials: Bank of America Corporation

Metric 2003 2004 2005 2006 2007


Profit Margin 28.4% 28.5% 28.9% 28.5% 22.0%

Total Assets 749 ,104. 0 1,044 ,631.0 1,291 ,803.0 1,459 ,737.0 1,715, 746.0

Total Liabilit ies 699 ,069. 0 960 ,047 .0 1,190 ,270 .0 1,324 ,465 .0 1 ,568, 943.0



Figure 2: Revenues & Profitability: Bank of America Corporation

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2003 2004 2005 2006 2007Year

US$Millions

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

ProfitMargin(%)




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LEADING COMPANIES



6.3 JP Morgan Chase & Co

Table 8: Key Facts: JP Morgan Chase & Co

Address: 270 Park Avenue, New York 10017 2070, New York, USATelephone: 1 212 270 6000Fax: 1 212 270 1648Website: www.jpmorganchase.comFinancial Year-End: DecemberTicker: JPMStock Exchange: New York


JP Morgan Chase & Company (JPMC) provides investment banking, security

services, asset management, hedge fund and retail banking services through itssubsidiaries. The company primarily operates in US, Europe, the Middle East, Africa

and the Middle East. It is headquartered in New York City, New York and employs

180,667 people.

JPMorgan Chase & Company (JPMC) is a financial holding company. It is a leading

global financial services firm and one of the largest banking institutions in the US. In

2007, JPMC recorded around $1.56 trillion in assets and $123.2 billion in

stockholders' equity. The company is a leader in investment banking, financial

transaction processing, asset management, and private equity.

The company operates through the following brands: JPMorgan Chase, JPMorganand Chase. JPMorgan Chase represents the parent company, which includes all of

the firm's subsidiaries; it is also used by the treasury services business. The following

businesses of JPMC use the JPMorgan brand: investment bank, worldwide securities

services, private banking, asset management, one equity partners and private client

services. The US consumer and commercial banking businesses serve customers

under the Chase brand.

JPMC's principal bank subsidiaries are JPMorgan Chase Bank, a national banking

association in the US with branches in 17 states, and Chase Bank USA, a national

bank that is the company's credit card issuing bank.

JPMC's principal non-bank subsidiary is JP Morgan Securities, which is the

company's US investment banking arm. Its operations are spread across more than

50 countries.

The company operates through seven segments: investment bank, retail financial

services, card services, asset management, treasury and securities services,

commercial banking, and corporate.


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LEADING COMPANIES



Investment bank

JPMC operates in the investment banking sector through JPMorgan, a subsidiary.

JPMorgan is one of the world's leading investment banks. The division advises on

corporate strategy, capital raising in equity and debt markets, risk management, and

market-making in cash securities and derivative instruments. Additionally, the division

engages in deploying its own capital to proprietary investing and trading activities.

Retail financial services

The retail financial services division operates through four sub-divisions: home

finance, consumer and small business banking, auto and education finance, and

insurance. This division is engaged in the provision of products and services including

deposits, investments, loans and insurance for consumers and small businesses. The

home finance sub-division is a provider of consumer real estate loan products and is

one of the largest originators and providers of home mortgages. The consumer and

small business banking sub-division offers one of the largest branch networks in the

US.

This sub-division operates in seventeen states with 3,100 bank branches and 9,100

ATMs. Auto and education finance is the largest non-captive originator of automobile

loans as well as a leading provider of loans for college students.

Through its insurance operations, the company is engaged in selling and underwriting

a range of financial protection products and investment alternatives. The insurance

product portfolio includes life insurance, annuities and debt protection products.

JPMC sold its insurance business in 2006.

Card services

The card services division is a leading issuer of credit cards in the US. It has more

than 154 million cards in circulation and about $153 billion worth of managed loans.

The card services division is the second-largest MasterCard/ Visa credit card issuer

in the US. It offers a wide variety of general-purpose cards to meet the needs of

individual consumers, small businesses and partner organizations. The partner

organizations include AARP, Amazon, Continental Airlines, Marriott, Southwest

Airlines, Sony, United Airlines and Walt Disney Company. The card division also

issues private-label cards for Circuit City, Kohl's, Sears Canada and BP. Additionally,

this division is the largest merchant acquirer in the US.

Asset management

The asset and wealth management division provides investment advisory and

management services to institutions and individuals. Through this division, JPMC is a

global leader in investment and wealth management.


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LEADING COMPANIES



It provides global investment management in equities, fixed income, real estate,

hedge funds, private equity and liquidity. The asset management operations deal in

both money market instruments and bank deposits. It also provides trust and estate

and banking services to high-net-worth clients, and retirement services to

corporations and individuals.

This division serves four distinct client companies through three businesses:

institutions through JPMorgan Asset Management, ultra-high-net-worth clients

through the private bank, high-net-worth clients through private client services, and

retail clients through JPMorgan Asset Management.

Treasury and security services

The treasury and securities services division provides transaction, investment and

information services that support the needs of institutional clients worldwide. JPMC is

one of the world's largest cash management providers and a leading global

custodian. This division operates through three sub-divisions: treasury services,

investor services and institutional trust services. The treasury services business

provides a variety of cash management products, trade finance and logistics

solutions, wholesale card products, and short-term liquidity management tools.

The investor services business provides custody, fund services, securities lending,

and performance measurement and execution services. The institutional trust

services sub-division provides trustee, depository and administrative services for debt

and equity issuers.

Corporate

The corporate division comprises private equity, treasury, corporate staff units and

expenses that are centrally managed. Private equity includes the JPMorgan Partners

and ONE Equity Partners businesses. Treasury manages the structural interest rate

risk and investment portfolio for JPMC. The corporate staff units include central

technology and operations, internal audit, executive office, finance, human resources,

marketing and communications, office of the general counsel, corporate real estate

and general services, risk management, and strategy and development. Other

centrally managed expenses include the firm's occupancy and pension-related

expenses, net of allocations to the business.

Commercial banking

The commercial banking division serves more than 30,000 clients including

corporations, municipalities, financial institutions and not-for-profit entities.

Commercial banking offers industry knowledge, experience, a dedicated service

model, and local expertise. Commercial banking operates in fourteen of the top fifteen

US metropolitan areas and is divided into three businesses: middle market banking,

mid-corporate banking and real estate banking.


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LEADING COMPANIES



Key Metrics

Table 9: Key Financials: JP Morgan Chase & Co

Metric 2003 2004 2005 2006 2007


Profit Margin 20.2% 10.4% 15.6% 23.3% 21.5%

Total Assets 770 ,912. 0 1,157,248.0 1,198,942 .0 1,351,250 .0 1,562,147.0

Total Liabi lit ies 724 ,758.0 1,051 ,595 .0 1,091 ,731 .0 1,235,730 .0 1,438,926 .0



Figure 3: Revenues & Profitability: JP Morgan Chase & Co

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2003 2004 2005 2006 2007Year

US$Millions

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

ProfitMargin(%)




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MARKET FORECASTS



CHAPTER 7 MARKET FORECASTS

7.1 Market Value Forecast

In 2013, the United States retail lending market is forecast to have a value of $14,929

billion, an increase of 19.3% since 2008.

The compound annual growth rate of the market in the period 2008-2013 is predicted

to be 3.6%.

Table 10: United States Retail Lending Market Value Forecast: $ billion,

2008-2013

Year $ billion % Growth2008 12,516.7 -4.40%2009 12,434.8 -0.70%2010 12,430.1 0.00%2011 12,873.4 3.60%2012 13,852.8 7.60%2013 14,928.9 7.80%CAGR, 2008-2013: 3.6%


Figure 4: United States Retail Lending Market Value Forecast: $ billion,

2008-2013


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2008 2009 2010 2011 2012 2013

$

billion

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

%Growth

$ billion % Growth


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MACROECONOMIC INDICATORS



CHAPTER 8 MACROECONOMIC INDICATORS

Table 11: United States Size of Population (million) , 2004- 2008(e)

Year Population (million) % Growth2004 293.02005 295.7 0.90%2006 298.4 0.90%2007 301.1 0.90%2008(e) 303.8 0.90%


Table 12: United States GDP (Constant 2000 Prices, $ billion), 2004-

2008(e)

YearConstant 2000

Prices, $ billion % Growth2004 10699.02005 11033.1 3.10%2006 11370.0 3.10%2007 11620.2 2.20%2008(e) 11701.5 0.70%


Table 13: United States Inflation, 2004- 2008(e)

Year Inflation Rate (%) % Growth2004 2.72005 3.4 27.40%2006 3.2 -4.70%2007 2.7 -16.40%2008(e) 2.8 2.20%



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APPENDIX



CHAPTER 9 APPENDIX

9.1 Methodology

Datamonitor Industry Profiles draw on extensive primary and secondary research, all

aggregated, analyzed, cross-checked and presented in a consistent and accessible

style.

Review of in-house databases Created using 250,000+ industry interviews and

consumer surveys and supported by analysis from industry experts using highly

complex modeling & forecasting tools, Datamonitors in-house databases provide the

foundation for all related industry profiles

Preparatory research We also maintain extensive in-house databases of news,analyst commentary, company profiles and macroeconomic & demographic

information, which enable our researchers to build an accurate market overview

Definitions Market definitions are standardized to allow comparison from country to

country. The parameters of each definition are carefully reviewed at the start of the

research process to ensure they match the requirements of both the market and our

clients

Extensive secondary research activities ensure we are always fully up-to-date with

the latest industry events and trends

Datamonitor aggregates and analyzes a number of secondary information sources,

including:

- National/Governmental statistics- International data (official international sources)- National and International trade associations- Broker and analyst reports- Company Annual Reports- Business information libraries and databases

Modeling & forecasting tools Datamonitor has developed powerful tools that

allow quantitative and qualitative data to be combined with related macroeconomic

and demographic drivers to create market models and forecasts, which can then be

refined according to specific competitive, regulatory and demand-related factors

Continuous quality control ensures that our processes and profiles remain focused,

accurate and up-to-date


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APPENDIX



9.2 Industry Associations

Consumer Bankers Association1000 Wilson Blvd., Suite 2500, Arlington, VA 22209-3912, USTel: 1 703 276 1750

Fax: 1 703 528 1290www.cbanet.org

9.3 Related Datamonitor Research

Datamonitor Industry Profiles

Global Retail Lending

Retail Lending in Asia-Pacific

Retail Lending in Europe

Retail Lending in the United KingdomRetail Lending in Germany

Retail Lending in France

Retail Lending in Japan


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data monitor - retail lending in the us - dec 2008

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